Posted on Fri, Feb. 10, 2006     The Charlotte Observer - displayed by permission

ROBERT BRUSS

Owners group has levy power

Q. Last year, in a freak hailstorm, the vinyl siding on some of the townhomes in our complex were severely damaged. The condominium home owner's insurance policy paid up to its maximum limit, but that wasn't enough. The association then assessed each owner of the other undamaged units $2,400 each. Yet we have over $175,000 still in our reserve funds that should pay for extraordinary expenses like this. The association directors say (1) they already took $100,000 from reserves, and (2) if they take the additional needed funds from the reserves, that would leave us without adequate reserves for emergencies. Can a home owner association assess undamaged unit owners in this situation?

Presuming the special assessment doesn't violate the homeowner association CC&Rs (conditions, covenants and restrictions) or the bylaws, after the vote of the board of directors it appears the association had the legal right to levy the $2,400 assessment on each owner. That's why you elect a board of directors to make very difficult decisions like that. I realize it seems unfair to assess the undamaged unit owners, especially when there are reserve funds that could be used to pay the additional costs.

IRS tax lien

Q. If I buy a house at a foreclosure sale auction, and if that house has an IRS tax lien, is it true that tax lien will drop off only if the taxpayer or I pay the lien amount? Or, will the lien drop off automatically after the property changes ownership? If you are the successful high bidder at the foreclosure auction, you will receive title subject to the recorded IRS tax lien. If the lien was recorded before the loan that is being foreclosed (highly unlikely), you become obligated to pay that tax lien or the IRS can wipe you out by foreclosing on its tax lien.

More likely, the IRS tax lien is junior to the mortgage being foreclosed. In this situation, if the IRS was given proper advance notice of the sale by the foreclosing lender, the IRS then has an automatic 120-day redemption period after the sale. That means the IRS then has up to 120 days to pay the successful high bidder the amount paid at the foreclosure sale, plus any necessary expenses such as payment of any other superior liens or the fire insurance bill. If you are the successful high bidder at the foreclosure sale, don't pay any nonessential expenses until the IRS 120-day redemption period expires. If you spend $5,000 fixing up the property before the IRS exercises its redemption right, the IRS won't reimburse you the unnecessary $5,000. For more details, please consult a local real estate attorney.